Commentary: The Whitefish contract in Puerto Rico shows the real cost of bad government

Posted on Oct 30, 2017 at 2:07 p.m.

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The controversy over the hiring of Whitefish, a small Montana-based company, to restore electrical service in Puerto Rico after Hurricane Maria lays bare the true costs of government corruption and the misuse of public funds. (The fact that the firm was belatedly fired goes only so far to mitigate the damage.) Rarely do we perceive the effects of corruption in such stark terms. Most often we see only a handful of convicted officials, and the actual toll is borne by the society at large, not by individuals. It is a seemingly victimless crime. Puerto Rico, with its hybrid Latin American and U.S. political culture, takes this idea a step further; "all politicians steal, but at least this one does something for the people," is a popular refrain.

The effects of this scandal on the island's economy and its citizens belie these cynical and erroneous notions.

The worst result of the ruinous contract with the now-infamous two-man firm was the delay in the arrival of outside utility workers. As The Washington Post reported, "an army of nearly 20,000 restoration workers, including FPL employees, from 30 states and Canada" were at work the first day after Hurricane Irma's landfall in Florida pursuant to very common mutual aid agreements with out-of-state utilities. In Puerto Rico, the first contract with Whitefish was signed on Sept. 26 - six days after landfall -- and the company started work on Oct. 2, according to CNN. Mutual aid agreements were not sought until this weekend, when Gov. Ricardo Rosselló finally acted after the Whitefish deal was canceled. Offers for aid from Florida and the American Public Power Association were never answered.

No one in Puerto Rico, not Rosselló nor PREPA Executive Director Ricardo Ramos, has satisfactorily explained the decision to put off bringing in external crews and equipment and forego mutual aid agreements, which raises suspicions that the job had been set aside from the outset for mainland private interests. That officials understood the need to bring in workers is clear. A request for proposals for just such services was published in the trade magazine Power Advocate between Aug. 18 and 24, according to El Nuevo Día. Ramos himself stated that Whitefish had been "contacted between hurricanes Irma and Maria" and Rosselló had said the day before landfall that he had been "negotiating" with FEMA to bring in outside crews to reestablish power "as soon as possible."

That those crews began to arrive only 12 days after the storm has had disastrous consequences. A modern economy cannot function properly without electric power. So in San Juan and throughout Puerto Rico, thousands of businesses have been shuttered for going on 40 days. Of almost 2,500 retail outlets authorized to process nutritional assistance program benefits, only 923, or 37 percent, have actually registered any transactions since the hurricane according to government statistics published on Oct. 25. Further, 33 hotels remain closed, including five-star properties such as the W Resort on Vieques and the Dorado Beach Ritz-Carlton Reserve.

The effects on employment can only be estimated right now, but emigration stands in as a proxy. According to Florida Gov. Rick Scott, R, 73,000 Puerto Ricans have arrived in his state alone in the storm's aftermath. This trend is likely to increase as other sectors of the economy falter. In a statement released on Oct. 20 by FDA Commissioner Scott Gottlieb, the agency revealed that it was considering allowing pharmaceutical and medical device manufacturers in Puerto Rico to "shift production to alternative sites" acknowledging "it will likely be months before power is fully restored and medical product manufacturing returns to pre-hurricane levels."

Contrary to popular wisdom, manufacturing, not tourism, is the island's main economic driver, making up 47 percent of GDP. With this loss in productivity comes an associated downturn in public revenue at a time when the island's massive debt had already been deemed unpayable by two successive governors.

Countless lives -- literally an unknown number -- have also been lost because of the prolonged blackout. Many hospitals are still operating with backup generators that are prone to failure when used as the main source of power over periods of days and weeks. Reports on the health-care situation in Puerto Rico have been heartbreaking: Patients on respirators or dialysis are not getting urgently needed treatment. Others have been discharged from medical institutions that could not care for them.

And now the attention the Whitefish contract has drawn imperils badly needed aid. If the federal government and nonprofit organizations perceive Puerto Rico as irredeemably corrupt even when it comes to funding for reconstruction, will they start to ignore appeals for the massive sums required to rebuild?

Even the governing New Progressive Party's (NPP) push for U.S. statehood could become ensnared in this embarrassing episode. Hernán Padilla, a former NPP mayor of San Juan, recently tweeted that the Whitefish scandal would hurt the island's chances of achieving "equal treatment" as a state, a longtime goal for much of the commonwealth's political establishment.

Sunday's cancellation of the contract only raises further questions. How much more will Puerto Rico have to pay on top of the $8 million to $10 million the company admitted had already been disbursed to demobilize work crews under the contract's cancellation clause? How will PREPA make up for the 10- to 12-week delay that Ramos predicted could result from the termination of the contract? Will FEMA reimburse the cost, or will the embattled utility be forced to assume the full cost of this boondoggle with its already meager cash reserve of $100 million?

Beyond a doubt, this kind of corruption has a real and palpable cost. No one in Puerto Rico should ever again consider graft a victimless crime. Just ask any Puerto Rican who has been without power for well over five weeks with no relief in sight, or anyone on the island who's lost a job, or worse, a loved one. That's a cost no one should have to bear.

- Column by Armando Valdés Prieto. Prieto is a lawyer, political consultant and a former director of the Commonwealth of Puerto Rico's Office of Management and Budget. In that capacity, he was also the governor's authorized representative to the Federal Emergency Management Authority.